Bloomberg’s chart of the day shows gold’s performance compared to other precious metals. As you can see the performance has been poor in relative terms compared to other metals. Of course, when compared to most other assets, gold has been an outperformer over a 1, 3, 5 or 10 year period.
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Gold tells a very important story in this whole credit mess. As long as investors continue to demand dollars as the global economy de-leverages it is likely that gold will go nowhere fast. Inflationistas need to understand that the velocity of money must pick-up before inflation becomes a real threat. The consumer borrowing and spending figures do not back this inflationary thesis. The investment community seems convinced that inflation will run wild at some point in the coming years, but that assumes that all of this liquidity will somehow make its way into the economy. So far, we’re not seeing the catalyst for that. As far as a fear trade I still like the Yen over both the dollar and gold.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.